Dollars

After two weeks of volatility, this week will be crucial for the US Dollar.

The minutes of the Federal Reserve's Market Committee (FOMC) meeting, which will be released on Wednesday, will be of interest to the market. Markets will need to carefully consider the Fed's stance on interest rate cuts. Views on inflation and the labor market will have a significant impact on the dollar. If concerns about the U.S. labor market intensify and support expectations of multiple rate cuts in 2024, it could affect dollar demand.

On Thursday, US initial jobless claims and private sector PMI data will be in focus. A sharp increase in jobless claims and a drop in the services PMI could reignite investor fears of a hard landing for the U.S. economy.

The service sector accounts for more than 70% of the U.S. economy. In the context of growing concerns about the labor market, a significant deterioration in service sector activity may make investors feel uneasy.

On Friday, the U.S. real estate market will be in focus. Economists generally agree that the real estate market is a barometer of the U.S. economy. If conditions in the real estate market deteriorate, it could weaken consumer confidence and spending, which is very important to the U.S. economy. Private consumption contributes more than 60% to GDP.

Meanwhile, the Jackson Hole Conference (Jackson Hole Symposium) will be held on Thursday and Friday. The market expects Fed Chairman Jerome Powell to hint at a rate cut in September, while maintaining optimism about a soft landing for the U.S. economy. If there is a deviation from market expectations, it may trigger market volatility.

Euro

On Tuesday, German Producer Price Index and Eurozone inflation data could influence demand for EUR/USD. The upward trend in German producer prices could signal a rise in inflation. Producers raise prices in an environment of rising demand, passing on costs to consumers.

Eurozone inflation data will be crucial for the euro, as investors are speculating whether the European Central Bank (ECB) will cut interest rates in September. If inflation is higher, it could reduce the probability of a rate cut in September, boosting demand for the euro.

On Thursday, private sector PMI data for Germany, France and the Eurozone will be released. A pickup in service sector activity could challenge market expectations for an ECB rate cut in September. However, investors should keep an eye on the sub-data, especially price trends. Higher prices could lower investors' bets on a September rate cut.

In addition, Thursday's ECB monetary policy meeting minutes will be watched. Markets will need to consider the central bank's views on inflation, the economy, and the path of interest rates.

Pound Sterling

Thursday's release of UK Private Sector PMI data will have an impact on the Pound. The services sector accounts for over 70% of the UK economy and could have a greater impact on the Bank of England's interest rate path.

A higher-than-expected services PMI could reduce the probability of a Bank of England rate cut in Q4 2024. Investors should also keep an eye on price-related sub-data. Higher input and output price trends, the main contributors to inflation, could reduce the likelihood of a Bank of England rate cut in Q4 2024.

On Friday, Bank of England Governor Andrew Bailey is likely to provide clues about the path of Bank of England interest rates following recent inflation, labor market, retail sales and private sector PMI data. The view on the timing of a rate cut could be crucial for the British pound.

Canadian Dollar

This week is very important for the Canadian dollar as investors speculate on when the Bank of Canada (BoC) will make its next rate cut.

On Tuesday, Canada will release new inflation data. If the data is weaker than expected, it could increase expectations of a rate cut in September, which could weaken demand for the Canadian dollar.

On Friday, retail sales data will also need to be watched. Another decline in retail sales could solidify expectations for a September rate cut. A downward trend in consumer spending could dampen demand-driven inflation, thus supporting a more dovish Bank of Canada rate path.

AUD

On Tuesday, the minutes of the Reserve Bank of Australia (RBA) meeting will influence market demand for the Australian dollar. If the minutes are hawkish, they could boost the Aussie, with the RBA facing the challenge of returning inflation to its target range.

On Thursday, private sector PMI data will also need to be considered. A pickup in private sector activity could support the case for an Aussie Fed rate hike in Q4 2024. However, input and employment trends will be in focus. Higher input prices and employment levels will be key factors.

New Zealand Dollar

New Zealand's trade data will be the focus of NZD attention. A narrowing trade surplus or a decline in imports and exports could signal another rate cut from the Reserve Bank of New Zealand (RBNZ). New Zealand's trade accounts for more than 50% of GDP. Weak demand could affect the labor market and consumer spending, which could dampen demand-driven inflation.

Japanese Yen

On Wednesday, Japan's trade data could affect demand for the yen. Improving terms of trade could boost the Japanese economy and support a more hawkish Bank of Japan (BoJ) rate path. Although the BoJ has paused further rate hikes due to the unwinding of yen carry trades, it is aiming to push rates to a neutral level, around 1%.

On Thursday, private sector PMI data will also need to be considered. The BOJ needs the services sector to drive demand-driven inflation. A pickup in service sector activity and higher input prices could increase expectations of a rate hike by the BoJ in the fourth quarter of 2024.

On Friday, Japanese inflation data could be crucial. Higher-than-expected annual inflation excluding food and energy could further influence the BOJ's rate path.

Apart from that, investors should also keep an eye on the Diet meeting. BOJ Governor Kazuo Ueda could face pointed questions about the July rate hike and the market turmoil it caused.

China

The People's Bank of China (PBOC) will be at the center of market attention on Tuesday, when it will announce its quoted market rates (LPR) for one- and five-year loans. If the LPR is unexpectedly lowered, it could boost investor demand for risky assets, including commodity currencies such as the Australian dollar.

China's recent economic indicators have increased speculation that Beijing has introduced a fiscal stimulus program. Investors should pay close attention to the relevant developments in Beijing. If Beijing plans to launch a fiscal stimulus program, it may support market demand for risk assets.